ch 15 book notes mkt 300

wholesales (marketing intermediary)

(or distributors) take title to the goods, store them in warehouses, and distribute them to retailers, other distributors, and sometimes end consumers.

1. Inventory control: quantity of inventory the firm maintains at each location 2. Protective packaging and materials handling: how the firm packages and efficiently handles goods in the factory, warehouse, and transport terminals 3. Warehousing: the distribution system's location of stock and the number of warehouses the firm maintains

A firm's warehousing and storage function contains the following elements:

facilitating the exchange process

A producer can cut the costs of buying and selling to multiple customers by using an intermediary.

logistics

Activities specifically related to the physical movement and management of raw materials or products. This is most commonly associated with trucking and other modes of transportation, but can also include warehousing and storage.

selective distribution

a firm chooses only a limited number of retailers in a market area to handle its line. By limiting the number of retailers, marketers can reduce total marketing costs while establishing strong working relationships within the channel. Moreover, selected retailers often agree to comply with the company's strict rules for advertising, pricing, and displaying its products. This helps protect the company's brand.

Radio Frequency Identification

a tiny chip with identification information is placed on an item. That chip can then be read by a radio frequency scanner from a distance, making tracking easier. These chips are embedded in employee ID cards that workers use to open office doors without keys.

containerization

combining several unitized loads into a single, well-protected load. Reduces the time required to load and unload ships, and limits in-transit damage to freight because individual packages pass through fewer handling systems en route to purchasers.

long distribution channel

By contrast, a long distribution channel involves several intermediaries working in succession to move goods from producers to consumers

lower cost of logistics

By using intermediaries, a manufacturer does not need to incur the cost of buying or leasing a network of its own warehouses to inventory product, or operate its own fleet of vehicles to deliver product. Instead, it can partner with a logistics company to ship product or a wholesaler who can inventory and deliver product to retailers or end-users.

facilitating the exchange process, lowering the cost of logistics, and increasing a company's sales and marketing infrastructure.

Intermediaries perform three important functions, including:

Increase Sales and Marketing Infrastructure

Intermediaries provide cost effective sales and marketing services to manufacturers as well.

intermodal operationas

include a combination of transport modes, such as rail and highway carriers (piggyback), air and highway carriers (birdyback), and water and air carriers (fishyback), to improve customer service and achieve cost advantages. Different combinations provide advantages to firms, depending on the scenario. Managers seek to maximize efficiency across available options, to save both cost and time.

short distribution channel

involves few intermediaries Business market products usually move through short channels due to geographic concentrations and comparatively fewer business purchasers. Service firms market primarily through short channels, because they sell intangible products and need to maintain personal relationships within their channels. Haircuts, manicures, and dental cleanings all operate through short channels.

downstream management

involves managing finished product storage, outbound logistics, marketing and sales, and customer service.

upstream management

involves managing raw materials, inbound logistics, and warehouse and storage facilities.

sales agent (marketing intermediary)

is a third-party person or company who represents the producer to wholesalers and retailers. Sales agents are essentially a contracted sales force with expertise in a particular market or geography. They are particularly important for smaller firms which might not be able to afford a full-time sales staff, or for firms going into new markets. Sales agents don't buy or take title to the product, but serve as go-betweens for producers and their distribution partners.

supply chain (value chain)

is the complete sequence of suppliers and activities that contribute to the creation and delivery of goods and services. It begins with the raw material inputs for manufacturing a product then proceeds to actual production activities. The final link is the movement of finished products through the distribution channel to customers.

vertical integration

is when a producer assumes control over functions that were previously handled by an intermediary. For example, Apple used to only distribute its products through other retailers, but practiced vertical integration when deciding to open its own retail stores.

direct channel

The simplest and shortest distribution channel. Carries goods directly from a producer to the ultimate user. This channel is often supplemented with direct selling. Not always practical to use.

direct channel, channels using marketing intermediaries, dual distribution, and reverse channels.

There are four distribution channels to choose from:

dual distribution

refers to the movement of products through two or more channels to reach the firm's target market.Marketers usually adopt a dual distribution strategy either to maximize their firm's coverage in the marketplace or to increase the cost-effectiveness of the firm's marketing effort. Nordstrom, for instance, has a three-pronged distribution system, selling through stores, catalogs, and online.

intensity factors (distribution intensity)

refers to the number or percentage of intermediaries (usually retailers) through which a manufacturer distributes its goods in a particular market. Optimal distribution intensity should ensure adequate market coverage for a product. Adequate market coverage varies depending on the goals of the individual firm, the type of product, and the consumer segments in its target market. In general, distribution intensity varies along a continuum with three general categories: intensive distribution, selective distribution, and exclusive distribution.

vertical conflict

results from disagreements among channel members at different levels. For example, retailers may develop private brands to compete with producers' brands or producers may establish their own retail stores or create mail-order operations that compete with retailers.

horizontal conflict

results from disagreements among channel members at the same level, such as two or more wholesalers or retailers. For example, a retailer that was previously the exclusive seller of a manufacturer's product might be upset if the manufacturer begins selling that product through other retailers. This could lead to price competition among the retailers, which could undermine the manufacturer's marketing strategy.

retailer (marketing intermediary)

specialize in selling product to consumers by opening stores, hiring sales staff, marketing to generate consumer traffic, and displaying merchandise in ways that encourage purchasing.

intensive distribution

strategy that seeks to distribute a product through all available retailers in a trade area. Usually, an intensive distribution strategy suits items with wide appeal across broad groups of consumers. Because Dove practices intensive distribution for many of its products, you can pick up one of its chocolate bars or ice cream products just about anywhere—the supermarket, the convenience store, and even the drugstore.

Enterprise Resource Planning (ERP)

system is an integrated software package that consolidates data from among the firm's units. Roughly two-thirds of ERP system users are manufacturers concerned with production issues such as sequencing and scheduling.

Marketing Intermediary (middle man/ producer-sales agent- wholesaler-retailer-consumer)

This is an organization that operates between producers and consumers to help bring the product to market. There are three primary types of marketing intermediaries: retailers, wholesalers, and agents. Some products serve markets in different areas of the country or world, or have large numbers of potential end users. Other categories of products rely heavily on repeat purchases. The producers of these products may find more efficient, less expensive, and less time-consuming alternatives to direct channels by using these.

logistical cost control

To reduce logistical costs, businesses are reexamining each link in their supply chains to identify activities that do not add value for customers. By eliminating, reducing, or redesigning these activities, they can often cut costs and boost efficiency. Some companies try to cut costs and offer value-added services by outsourcing some or all of their logistics functions to specialist firms.

market factors

Other factors can affect channel choice, including the market's needs, its geographic location, and its average order size. To serve a concentrated market with a small number of buyers, a direct channel offers a feasible alternative. In serving a geographically scattered area, distribution through intermediaries makes sense.

product factors

Product characteristics also guide the selection of the optimal distribution channel strategy. For example, perishable goods, such as fresh fruit and vegetables, milk, and fruit juice move through short distribution channels to reduce storage time. Products with low unit costs—such as cans of dog food, bars of soap, and packages of gum—typically travel through long channels so that they can gain the widest distribution possible.

market, product, organizational, competitive, and intensity factors.

5 factors that affect the selection of a distribution channel:

1. railroads (largest share of freight business) 2.motor carriers (fast and consistent) 3. water carriers (inland or barge lines and oceangoing deep water ships low cost higher transit time) 4. pipelines (slow, few locations, low product inventory) 5. air freight (higher security/ more international use)

5 major modes of transportation:

organizational factors

Companies with strong financial, management, and marketing resources feel less need for help from intermediaries. This affects distribution channel selection. A large, financially strong manufacturer can hire its own sales force, warehouse its own goods, and extend credit to retailers or consumers. A firm with a broad product line can usually market its products directly to retailers or business users, because its own sales force can offer a variety of products. High sales volume spreads selling costs over a large number of items, generating adequate returns from direct sales. By contrast, a small firm with fewer resources may do better with the aid of intermediaries. Single-product firms often view direct selling as unaffordable.

direct selling

Direct channel is often supplemented with this. A marketing tactic in which a producer establishes direct sales contact with its product's final users. It is an important option for goods requiring extensive demonstrations for persuading customers to buy

competitive factors

Marketers sometimes choose distribution channels to either avoid competitors or compete with them head-to-head. Sometimes businesses will only work with distributors who offer exclusivity, meaning they will not carry a competitor's line. In many categories, this is not possible, as wholesalers often carry most major brands so that they can provide the best assortment to their retail customers.Businesses that explore new distribution channels must be careful to avoid upsetting their channel intermediaries. Distribution channels work smoothly only when members cooperate in well-organized efforts to achieve maximum operating efficiencies.

exclusive distribution

When a producer sells to only a small number of retailers or grants exclusive rights to a wholesaler or retailer to sell its products in a specific geographic region, it practices exclusive distribution. Exclusive distribution agreements also govern marketing for some major appliance and apparel brands.Marketers often develop and maintain an image of quality and prestige for the product. If it is harder to find the product seems more valuable. In addition, exclusive distribution limits marketing costs because the firm deals with a smaller number of accounts. In exclusive distribution, producers and retailers cooperate closely in decisions concerning advertising and promotion, inventory carried by the retailers, and prices.

distribution channels (marketing channels)

bring buyers and sellers together to complete transactions. The individuals and organizations who manage the flow of product from producers to consumers.

reverse channels

channels designed to return goods to their producers. Reverse channels have gained increased importance with rising prices for raw materials, increasing availability of recycling facilities, and a move toward increased environmental sustainability. Reverse channels also handle product recalls and repairs. example: Purchase a new set of tires, and you'll find a recycling charge for disposing of the old tires. An appliance manufacturer might send recall notices to the buyers of a washing machine.